Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...
Nov. 4 — The Labor Department scored its first victory in legal challenges to its fiduciary rule for retirement investment advisers ( Nat’l Assoc. of Fixed Annuities v. Perez , D.D.C., No. 16-1035 (RDM), 11/4/16 ).
The U.S. District Court for the District of Columbia is the first court to issue a ruling in a handful of cases across the country that challenge the legality of the fiduciary rule, also known as the conflict-of-interest rule. Other cases are pending in federal courts in Texas, where there’s a greater chance of getting a favorable court ruling for the U.S. Chamber of Commerce and other industry groups that want the rule nixed.
The National Association for Fixed Annuities argued in its lawsuit in D.C. that the Department of Labor went beyond its statutory authority when it extended the reach of the Employee Retirement Income Security Act to individual retirement accounts. IRAs typically aren’t governed by ERISA, but by extending the definition of an ERISA “fiduciary” to essentially anyone giving retirement advice the DOL went too far, NAFA argued.
The group also argued that the rule would have “catastrophic consequences” for the fixed indexed annuities industry. NAFA also took issue with the rule’s best-interest-contract exemption, contending that aspect of the rule impermissibly creates a private cause of action for retirement investors.
Judge Randolph D. Moss rejected each of these arguments in his Nov. 4 decision. He denied NAFA’s motion for a temporary block of the rule, and went even further by granting the DOL’s motion for summary judgment.
In his 92-page opinion, Moss took a deep dive into every aspect of how DOL researched retirement advice issues before developing the rule, and ultimately upheld every step the DOL took in arriving at the rule that’s set to take effect in April 2017.
Bryan Cave LLP represented NAFA. The DOL was represented by the Department of Justice.
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